Abstract

The Commission of the European Community has proposed a restructuring of the Common Agricultural Policy (CAP) that is independent of the ongoing General Agreement on Tariffs and Trade (GATT) negotiations. This study analyzes the proposal in terms of the flexibility it would grant EC negotiators at the GATT. The results indicate that adopting the proposal would sharply reduce the volume of EC cereal, meat, and dairy product exports. EC negotiators at the GATT would be able to offer significant reductions in export subsidies, a primary concern of the United States and other exporting countries. By reducing production, the proposal would also significantly reduce internal supports. An Aggregate Measure of Support (AMS) calculation estimates reductions from a base period of 1986-8 to 1997 that range from 17 percent for beef to 60 percent for pork and poultry. The proposal would provide increased market access, but would still insulate internal prices from world price fluctuations. Long-term world price increases attributable to EC export reductions are estimated to range from 5 percent to 10 percent for meat, corn, barley, and soybeans to 15 percent to 20 percent for wheat and dairy products.